Alimony and Its Tax Implications

Nov 05, 2014

In New Jersey, alimony is often a contested issue in many divorces.  Alimony is the payment of support from a one spouse to the other in order to allow the dependent spouse to enjoy the standard of living that the couple experienced during the marriage.  Crews v. Crews, 164 N.J. 11 (2000); Lepis v. Lepis, 83 N.J. 139 (1980).  There are multiple types of alimony in New Jersey.  All types are outlined in N.J.S.A. 2A:34-23(b).  When setting an alimony award, the court must consider a number of factors outlined by N.J.S.A. 2A:34-23(a).   In a recent case, Happold v. Happold, the court’s consideration of one of the statute’s factors regarding alimony was at issue.

In Happold, the trial court found that defendant’s monthly budget was $4,863, while plaintiff’s budget was $6,419.  The court also imputed an income of $290 per week to defendant and found that plaintiff’s annual income was $174,100.  The court then calculated plaintiff’s amount of disposable income based on his yearly earnings and monthly budget, which was determined to be $8,081 per month, not including any tax considerations.  The court thus awarded defendant $1,050 per week in alimony, which would lower to $750 per week after three years had passed.  This alimony award, the trial court decided, would leave defendant only slightly short of her monthly budget.

On appeal, the New Jersey Appellate Division found that the trial court’s alimony award was based on an analysis of all but one of the New Jersey statute’s alimony factors.  In particular, the trial court failed to consider the tax consequences of the alimony award to the parties.  Rather, the “court simply acknowledged that the alimony will be taxable income to defendant, and deductible by plaintiff.”  Therefore, the Appellate Division found that without a consideration of the tax consequences, the trial court could not have concluded that plaintiff would be just shy of meeting her monthly budget.  The Appellative Division ultimately found that the trial court must do more than acknowledge potential tax consequences, but instead must make “specific findings” regarding those consequences. (citing See Boardman v. Boardman, 314 N.J. Super. 340, 345 (App. Div. 1998)). The case was remanded to the trial court for further consideration of this particular alimony factor.

During a divorce, many issues can arise, alimony being just one of them.  With the help of an experienced matrimonial attorney, such issues can be resolved between the parties in an efficient manner.  Call the attorneys at Sarno da Costa D’Aniello Maceri LLC at 973-274-5200 for help with your divorce case.